Pep Boys 2010 Annual Report Download - page 89

Senior Secured Term Loan Facility, due October 2013
Our Senior Secured Term Loan (the ‘‘Term Loan’’) is due October, 2013. This facility is secured by
a collateral pool consisting of real property and improvements associated with our stores, which is
adjusted periodically based upon real estate values and borrowing levels. Interest accrues at the London
Interbank Offered Rate (LIBOR) plus 2.0% on this facility.
As of January 29, 2011, 126 stores collateralized the Senior Secured Term Loan. The outstanding
balance under the Term Loan at the end of fiscal 2010 was $148.6 million. The $1.1 million decline in
the outstanding balance was due to quarterly principal payments of $0.3 million.
Revolving Credit Agreement, through January 2014
On January 16, 2009, we entered into a Revolving Credit Agreement (the ‘‘Agreement’’) with
available borrowings up to $300.0 million. Our ability to borrow under the Revolving Credit Agreement
is based on a specific borrowing base consisting of inventory and accounts receivable. Total incurred
fees of $6.8 million were capitalized and are being amortized over the five year life of the facility. The
interest rate on this credit line is LIBOR or Prime plus 2.75% to 3.25% based upon the then current
availability under the Agreement. Fees based on the unused portion of the Agreement range from 37.5
to 75.0 basis points. As of January 29, 2011, there were no outstanding borrowings under the
Agreement.
The weighted average interest rate on all debt borrowings during fiscal 2010 and 2009 was 6.3%
and 4.2%, respectively.
Other Matters
Several of our debt agreements require compliance with covenants. The most restrictive of these
requirements is contained in our Revolving Credit Agreement. During any period when the availability
under the Revolving Credit Agreement drops below the greater of $50.0 million or 17.5% of the
borrowing base, we are required to maintain a consolidated fixed charge coverage ratio of at least
1.1:1.0, calculated as the ratio of (a) EBITDA (net income plus interest charges, provision for taxes,
depreciation and amortization expense, non-cash stock compensation expenses and other non-recurring,
non-cash items) minus capital expenditures and income taxes paid to (b) the sum of debt service
charges and restricted payments made. The failure to satisfy this covenant would constitute an event of
default under the Revolving Credit Agreement, which would result in a cross-default under our 7.50%
Senior Subordinated Notes and Senior Secured Term Loan.
As of January 29, 2011, the Company had no borrowings outstanding under the Revolving Credit
Agreement, additional availability of approximately $138.2 million and was in compliance with its
financial covenants.
Other Contractual Obligations
We have a vendor financing program which is funded by various bank participants who have the
ability, but not the obligation, to purchase account receivables owed by us directly from our vendors.
The total availability under the new program was $100.0 million as of January 29, 2011. There was an
outstanding balance of $56.3 million and $34.1 million under this program as of January 29, 2011 and
January 30, 2010, respectively.
We have letter of credit arrangements in connection with our risk management, import
merchandising and vendor financing programs. We were contingently liable for $0.3 million in
outstanding commercial letters of credit as of January 29, 2011, and $107.6 million and $103.3 million
in outstanding standby letters of credit as of January 29, 2011 and January 30, 2010, respectively.
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